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ERG Aims for World-class Procurement Services with Crown Commercial Service

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NelsonHall recently attended a briefing by the Cabinet Office Efficiency and Reform Group (ERG) about the new Crown Commercial Service (CCS). This has replaced Government Procurement Service (GPS) and is to become the most comprehensive government procurement services provider in Europe. It is to address the market in a more coherent fashion by organizing into domains and segments but operating as a single client. It is to simplify dealing with government for large and small suppliers alike and aim to become a discerning and demanding customer in ensuring that the services contracted for are delivered.

Currently £11bn of spend under management goes through GPS, split 5:6 between central government  and the wider public sector. In practice, the amount of spend that GPS closely manages is <£1bn. The remainder goes through GPS frameworks in which GPS has little involvement after the initial procurement.

Changes that will be established with CCS include:

  • Centralized spend management: for  > £10bn of annual procurement
  • Managed services: CCS is to develop managed services capabilities towards building a world class commercial capability. It will take over the procurement from departments – including, initially, DCLG’s, and large chunks of spend on common goods and services by the DWP and the MoD among others. Operations will be transferred to CCS for circa £5bn of spend.
  • Building capacity: CCS currently has ~ 600 staff (450 GPS and 150 Efficiency Cluster) and this number will grow to ~1,000 by 2016/17. A formal program is planned to develop the senior leadership to be a high performing team. In addition, a formal recruitment hub is being established for recruitment activity. Capabilities are to be underpinned by improved technology
  • Extending the remit: CCS will also continue discussions with the wider public sector, e.g. police, health trusts and local government, to bring in more spend under CCS with managed services and consultancy being provided back to the public sector. ICT spend is not expected to come under CCS’ responsibility as departments consider this to be strategic to their functions and wish to keep control of its procurement. Instead CCS will be looking to provide consultancy, advisory and contract management services to improve ICT procurement in the public sector. CCS will continue to provide Crown Representatives. Another six are about to be appointed to start work in FY 2014/15.
  • Strengthened functional leadership and commercial capabilities: CCS will be focusing on improving pre and post tender activities. It will be looking to improve planning and specification of requirements before the tender stage, to develop requirements that shape markets and the supply base to government. Post procurement, contract and supplier management are to be drastically improved with the service aiming to attain world class standards. Cross government contract reviews will be a key aspect of this. The actual tender process is also to be improved - speeded up.  Work is already underway with the EU to speed up regulated public sector procurement. Change is expected imminently. The government has already halved average turnaround times for EU procurements from 200 days in 2011 to < 100 days in 2013.
  • Broadening the supply base: Currently 50% of the £40bn annual central government spend on goods and services is with 39 suppliers. The rest is spent with ~ 220k suppliers. Improvements are underway with the government spending £1.5bn more with SMEs than in prior years.  

Measures taken to date include:

  • The establishment of G-Cloud for standard products and services, and the Digital Services Framework (DSF) for bespoke services and products. 175 suppliers were selected to the DSF including a large group of SMEs many of which have never done business with central government before. The CCS will let and manage contracts under DSF through mini-competitions that will complete within days
  • £2bn worth of energy centrally procured and delivered across the public sector in 2012/13 with savings to the public of >£109m
  • New contracting model for facilities management is underway with a procurement that the ERG estimates will generate savings of 10% to 15% (up to £350M) over the 4-year life of the vehicle.

By the end of 2014/15 spend to the tune of £10bn, will have been transferred to CCS.

CCS expects suppliers to:

  • Embrace competition
  • Be innovative through proposals for improving public services
  • Be transparent through open book accounting
  • Demonstrate high levels of corporate responsibility
  • Deliver what the government is asking for as an intelligent client
  • Deal with the government effectively as one customer through CCS
  • Make a reasonable but not excessive profit
  • Provide opportunities to SMEs in the supply chain.

In prior years we saw the government  use blunt instruments to start to bring procurement spending under control. Measures included an initial freeze on new contracts and discretionary spend, reviews of existing contracts and requiring central approval for contracts. To date £10bn of savings has been achieved.

CCS signifies the start of a new phase and a longer term approach to managing government procurement. In 2013/14, it is likely to manage £2bn-£3bn of spend.

Areas of immediate focus in 2014 include:

  • Improving contract management
  • Letting ICT frameworks contracts of ~£5bn TCV (and another £5bn in 2014/15)
  • Some existing contracts will be disaggregated and re-tendered
  • Looking to increase gainshare in contract terms
  • Engaging with suppliers in small groups
  • Working with the wider public sector as part of expanding CCS's responsibilities.

The elephant in the room is a political one: With a general election due in 2015 there is a risk that the progarmme of change itself will be subject to change and will not be implemented. The ERG believes there is consensus among political parties for this activity, to bring government procurement under control. It has also engaged with senior Civil Servants and stakeholders through regular briefings and consultation. Historically, other changes, such as the creation of a central buying agency such as GPS, have stood the test of time and different governments in one form or another.

This is an ambitious program of change which without ERG's track record, we would have consigned to the history of government initiatives that got no wehere. Given the scale of change that ERG has already achieved, and strong leadership at ministerial level, we believe there is good chance for the changes to get implemented and to reach different segments of the public sector.

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